Challenges Continue for Illinois Recreational Marijuana Rollout

PublicationsSeptember 10, 2019

Illinois’ plan was always ambitious—sign a recreational marijuana law into law in June 2019 and have a retail market up and running by January 1, 2020. The hope was that the 55 existing medical marijuana dispensaries could transition quickly into recreational dispensaries and each open a secondary site, giving the state 110 recreational dispensaries at the start of the year. At the same time, state regulators could vet new potential entrants (including social-equity applicants) who could supplement the developing market over the next several years. According to a lengthy article in yesterday’s Chicago Tribune, there are growing concerns within the industry regarding the viability of the January 1, 2020 rollout.

The concerns relate to both the existing medical dispensaries and the proposed secondary sites. For the existing dispensaries, a primary concern is municipal opt-outs, as we wrote about here. The law allows local governments to opt-out of recreational sales, and several municipalities (including Naperville) have exercised that right. That means at least one current medical dispensary (3C Compassionate Care Center in Naperville), and likely more, will not be open for recreational sales in January 2020.

A second concern for existing dispensaries is accommodating an influx of recreational customers at existing medical dispensary locations. By design, many medical dispensaries were off the beaten path and intended to serve a smaller customer base. The operators of such dispensaries had hoped that upon passage of the recreational marijuana law, they could move the medical dispensary to a more conducive location for retail sales. Thus far, however, the Illinois Department of Financial and Professional Regulation (IDFPR) has indicated that a medical dispensary that moves will not be eligible to sell recreational marijuana, and the Governor has supported that position.

On the secondary site side, the concerns relate to a lack of predictability. Several state agencies are required to issue critical rules and regulations, but do not have to do so until closer to January 1, 2020. Many entities claim to need these rules and regulations to develop their going-forward strategy. At the same time, there is pressure to move quickly. The IDFPR is not issuing secondary site licenses until the proposed site has passed a final inspection. That sets up the possibility that two entities will be seeking secondary sites in the same area, both will pour resources into leasing or purchasing the location and building it out, and the first to pass inspection will effectively box out the other (because no two recreational stores can be within 1,500 feet of each other). Operators have expressed concern about expending substantial resources on an uncertain secondary site locations.

State officials appear unfazed by the concerns expressed by the industry. In a quote provided to the Tribune, Deputy Governor Christian Mitchell stated “[f]rom everything that we’ve seen, everything looks to be on track to make sure that we have a very robust rollout on Jan. 1.” From the state’s perspective, in order to get a market up and running quickly, it has provided existing medical operators with a financial windfall by allowing them to both sell recreational marijuana from existing sites and open secondary sites. But allowing existing dispensaries to move and providing some of the other accommodations being requested by existing operators is apparently a bridge too far. It appears the state does not believe such additional accommodations are necessary to get the market up and running, and may in fact hinder the state’s long-term effort to open the industry to new entities, particularly social-equity entities.

Ultimately, despite their disagreements, both the state and existing operators share the same goal: opening up enough retail locations by January 1, 2020 to serve the expected deluge of recreational customers. We thus expect to see the continued airing of grievances, but also a continued focus on moving this endeavor forward. Stay tuned to the blog for continued analysis of Illinois’s rollout.

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